Mumbai: Private equity (PE) firm Warburg Pincus is leading a $600 million investment in newly formed Africa-focused energy exploration and production company Delonex Energy Ltd. Warburg Pincus will be the largest shareholder in the London-based Delonex Energy, which is headed by former Cairn India Ltd chief executive Rahul Dhir.
Dhir was recently executive-in-residence at Warburg Pincus, where he worked in close collaboration with the PE firm over the past several months to formulate the Delonex business plan.
Delonex Energy, which has subsidiaries in the UK, India and Kenya, is focused on using technology and market access to discover, develop and commercialize hydrocarbons efficiently and effectively. Its areas of focus include the East African Continental Rift System, which extends from the Red Sea through Ethiopia, Kenya, Uganda, Tanzania to Mozambique; the Central African Rift System from Chad to South Sudan; and the coastal margins of East Africa.
The company plans on accessing opportunities in these areas through farm-in and direct awards from host governments.
“There is significant, underexplored resource potential in Central and East Africa, and our team has the experience, technology and capital to unlock these hydrocarbon resources and create value for our host governments,” said Dhir in a statement. “Warburg Pincus is one of the leading investors globally in the energy sector and has an impressive track record.”
The investments of Warburg Pincus include Kosmos Energy (KOS) Ltd, the portfolio of which includes Jubilee Field, the first commercial hydrocarbon discovery in Ghana.
High oil prices are driving exploration in Africa. Companies such as Anadarko Petroleum Corp. and Eni SpA found more than 100 trillion cu. ft of gas off the coast of Mozambique, according to a Bloomberg report.
“Along with their knowledge of Africa and a successful track record in similar basins around the world, we believe this team is well positioned for exploration success in Central and East Africa. We look forward to supporting the company as it seeks new opportunities in this important part of the world,” said Warburg Pincus managing director Somit Varma. Warburg Pincus has a track record of engaging executives in residence, experienced management professionals who work with the PE firm’s industry teams to identify and evaluate potential new investment opportunities. Once a new investment is made with the support of the executive-in-residence, it’s likely he or she becomes chief executive or executive chairman of that firm.
Recent examples include Brian Reinsborough, a former chief executive of Nexen Petroleum, who is now chief executive of Venari Resources, and George Kurtz, a former McAfee chief technology officer, who is now chief executive of Crowdstrike. Warburg Pincus invested in both Venari and Crowdstrike. Earlier, Neeraj Bhargava, co-founder and group chief executive of WNS Global Services (April 2002-January 2010), was an executive-in-residence at the PE firm.
At Delonex Energy, Dhir recently hired David Ginger as executive director, exploration and sub-surface at the new firm. Prior to that, Ginger served as the director, sub-surface and new ventures at Cairn India, managing a technical team of more than 120 professionals. As chief executive at Cairn India, Dhir led the company from its inception through to its $2 billion initial public offering (IPO) and ultimate sale to Vedanta Resources Plc.
Experts said the executive-in-residence initiative of Warburg Pincus is all about backing the right person and the right management team.
“The plan is to find the right, experienced person in that space, back him, give him capital and grow the business, maybe make acquisitions. The value creation can be seen in five to six years,” said Avinash Gupta, senior director and leader, financial advisory, Deloitte, in India.
Gupta said that while most investors want to replicate the model, only a few have the financial wherewithal to carry out such investments.